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INVENTORY MANAGEMENT

Which one of the following statements concerning the economic order quantity (EOQ) model is TRUE?

 Annual holding cost, annual purchasing cost and annual delivery costs are the relevant costs in the
 Quantity discounts can occur and taken into account in the total cost calculations.
 Partial receipts are allowed.
 Uncertainty in leadtime may not exist.

In a two-bin inventory system, the amount contained in the second bin is equal to the:

 ROP
 EOQ
 amount in the first bin
 optimum stocking level
 safety stock

If both the lead time and daily demand are constant (no variation), the ROP is equal to:

 Expected demand plus safety stock.
 Expected demand minus safety stock.
 Daily demand times lead time.
 Safety stock

Fixed-order quantity models are:

 Time triggered
 Event triggered
 Made up of a variable order size
 Fixed for a specified time period

One use of inventory is

 to ensure that item cost is maximized.
 to provide a hedge against inflation.
 to tightly link a firm s production with its customer s demand.
 to tightly link production and distribution processes.

Most inventory models are made based on:

 Minimizing lead time
 Minimizing setup times
 Profit maximization
 Optimum influence on demand
 Cost minimization

Extra units that are held in inventory to reduce stockouts are called

 just-in-time inventory.
 demand variance.
 reorder point.
 safety stock.

In the basic fixed-order quantity model, if annual demand doubles, the effect on the Optimal Order Quantity (EOQ) is:

 it is about 70% of its previous amount
 it increases by about 40%
 it doubles
 decreases by a factor of 2
 it is half its previous amount

Which of the following inventory systems would be most appropriate in controlling many items ordered from the same vendor?

 Fixed Order Quantity System
 Materials Requirements Planning System
 Fixed Time Period System
 One Period Inventory Model Using Marginal Analysis

With the quantity-discount model, an order level might not be at a minimum point of a total cost curve.

 False
 True

The goal of ABC analysis is to

 estimate dollar value per pound.
 determine the profitability of items.
 estimate average volume per dollar value.
 to identify the A items for better inventory control.

Policies based on ABC analysis might include investing

 more in supplier development for A items.
 the most time and effort verifying the accuracy of records for B items.
 extra care in forecasting for C items.
 more in inventory security for C items.

A system that triggers ordering on a uniform time basis is called a

 fixed-quantity system.
 reorder point system.
 EOQ.
 fixed-period system.

Inventory record accuracy would be decreased by

 ABC analysis.
 cycle counting.
 reorder points.
 increasing stockroom accessibility.

The two most important inventory-based questions answered by the typical inventory model are

 when to place an order and how many of an item to order.
 when to place an order and what is the cost of the order.
 how many of an item to order and what is the cost of this order.
 how many of an item to order and with whom the order should be placed.

Reorder point models are primarily used for independent demand items.

 True
 False

In the basic Q model, if the lead time doubles, the EOQ will:

 double
 decrease by half
 none of the above
 remain the same
 increase, but not double

Which one of the following statements is best?

 In a fixed interval system, the value of Q is kept the same from one cycle to another.
 A fixed interval system lends itself more to quantity discounts than does a ROP system.
 A fixed interval system requires more administrative control and computer support than does a ROP sy
 A fixed interval system requires more safety stock than a ROP system.

Which of the following is NOT a type of inventory?

 work-in-process
 finished goods
 raw material
 MRP

What items do students typically buy on an ROP basis?

 gasoline for car
 computer software
 textbooks
 wedding gifts
 bran muffins

The Basic EOQ model ignores:

 Holding costs
 B and C items
 A items
 Purchasing costs
 Ordering costs

A firm producing medical equipment to customer specifications is most likely using a

 mass production strategy.
 make-to-stock strategy.
 make-to-order strategy.
 assemble-to-order strategy.

If the production rate in an economic production lot size model is very much larger than the consumption rate, the results are practically the same for economic production lot size and EOQ.

 False
 True

For a company that manufactures most of its products as standards, more inventory should be placed

 closer to the customer.
 within the plant as work-in-process.
 close to suppliers.
 equally distributed between the plants and warehouses.

ABC analysis divides an organizations on-hand inventory into three classes based upon

 the number of units on hand.
 annual dollar volume.
 unit price.
 annual demand.

Monitoring the temperature of tomatoes during shipment would best be done using:

 RFID tags
 Universal Product Codes (UPC)
 ROP
 GPS
 Bar codes.

Space considerations are not included in any of the economic ordering models.

 True
 False

The difference(s) between the basic EOQ model and the production order quantity model is (are) that

 A. the EOQ model does not require the assumption of known, constant lead time.
 the production order quantity model does not require the assumption of instantaneous delivery.
 the production order quantity model does not require the assumption of known, constant demand.
 there are no holding costs in the production order quantity model.